Key SA employers on verge of shutting down as power prices surged during storm
TREASURER Tom Koutsantonis had to plead with a private power station to provide more electricity during this week’s storms as prices soared, it has emerged.
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SOUTH Australia’s biggest employers were on the verge of costly shutdowns caused by skyrocketing electricity prices – forcing Treasurer Tom Koutsantonis to plead with a private power station to produce more energy.
The Pelican Point gas-fired station at Port Adelaide will lift supply from Friday until Sunday week to avoid temporary closures affecting thousands of staff at firms understood to include BHP Billiton and Arrium.
Mr Koutsantonis said he was forced to intervene on Wednesday for the first time since ETSA was privatised.
But he insisted the desperate plea to Pelican Point operator Engie would be the last time he took such action.
That request came after a delegation of between six and 10 major manufacturers told him they were considering shutdowns after wild fluctuations in energy prices, blamed in part on this week’s storms.
The companies are understood to include besieged steelmaker Arrium, Olympic Dam operator BHP Billiton, Port Pirie lead smelter Nyrstar, cement producer Adelaide Brighton and automotive supply chain firms linked to Holden.
The social services sector has called for an immediate summit, warning that the state’s rapid rush into green energy has created uncertainty for both households and employers.
SA’s power charges have soared in the past week, hitting more than seven times the Victorian price and almost eight that in NSW, because the state’s market is isolated from the rest of the Australia.
Upgrades to an interconnection cable between SA and Victoria have been delayed by the wild storms. The Heywood cable had long been scheduled for an upgrade between last Monday and Thursday, but the repair timeline has blown out.
Mr Koutsantonis said frigid conditions in the eastern states were also eating up gas supplies, which had further left SA fending for itself and created huge price volatility. SA has had to overwhelmingly rely on intermittent renewable energy sources like wind and solar.
Mr Koutsantonis refused to reveal details of the request to Engie but said the companies that considered the shutdowns were major employers and very large energy consumers.
“They’re some of the state’s largest employers, responsible for big numbers of jobs,” he said.
A report from Deloitte Access Economics has also warned that household prices will spike over the next two years, and blackouts will become more common, due to SA’s high level of green energy.
An Arrium spokeswoman said: “Power spikes are hugely problematic and costing the company a lot of money.
“The State Government is moving to bring alternate power online and the company is working with (it) to find solutions to the problem.”
The steelworks is to go on the market later this month, amid clouds over its future.
Uniting Communities advocacy and communications manager Mark Henley said the state needed to hold an energy summit to come up with a long-term fix.
“It is much better if the State Government does intervene briefly in the short-term, so that we can actually work out a decent strategy for SA after that,” he said.
“We need everyone around the table – business, community and government – to work out what the real problem is.”
Pelican Point will provide 239MW of extra supply into the market from tomorrow.
Mr Koutsantonis said he had been “dragged” to agreeing to intervene in the market and request more baseload energy production. He said companies should insure themselves against future instability by accessing set-price energy contracts, which are similar to fixed mortgage rates.
“This work was scheduled 12 months in advance, they knew it was coming,” he said.
“There was an opportunity for companies to hedge. I would say to them that this is not going to become a normal occurrence. That’ll be the last intervention I make.”
Mr Koutsantonis said the recent instability had caused “massive price fluctuations” for business, but was unlikely to flow through to households that were on more stable, long-term contracts.
He also rejected suggestions the state’s long-held policy of pushing green energy, which has made SA more reliant on those sources than almost anywhere in the world, caused the crisis.
SA needed approval for new infrastructure to connect with more states, so it could export more green power and share supplies with more than just Victoria, he said.
Last week’s State Budget included $500,000 for a study to explore more connections.
Business SA chief executive Nigel McBride said he feared investors would begin to doubt that the state offered a secure energy supply and turn away from job-creating projects.
“Without energy security and price competitiveness, and if we continue to have events like this occur, it’s symptomatic of a system that is failing,” Mr McBride said. “This can affect having the confidence to invest in this state. The futures on power prices are going to continue to rise.”
Opposition energy spokesman Dan van Holst Pellekaan said households ultimately faced higher prices as the long-term effect of “failed policies” flowed through the market.
“All South Australians are paying the price of the Weatherill Government’s failed energy policies,” he said.
“The over-zealous rush into wind farms without associated large-scale battery storage is directly responsible for the surging price of electricity in SA.”